European Tax & Compliance Bulletin 55

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UK Enters Transitional Period with the European Union:

The United Kingdom’s Withdrawal Agreement, which formalises the UK’s exit from the EU, entered into force at midnight Central European Time on 31 January 2020. The UK is as such no longer a member state of the European Union, but EU law will continue to apply in the UK at least until the end of the transition period – 31 December 2020, and the Court of Justice will continue to have jurisdiction over any claim brought by or involving the UK until the end of the transition period.

OECD Inclusive Framework Renew Commitment to Finding Digital Tax Solution:

On 31 January, the OECD Inclusive Framework reaffirms its commitment to reach a solution by the end of 2020, endorsing and agreeing the outline of the Unified Approach Under Pillar 1 to create new tax rights for market jurisdictions as the basis for future negotiations, and acknowledging progress made to date in respect of Pillar 2.

As concerns the scope of the Proposals, the Statement sets out that new taxing rights created under the present Pillar 1 proposal are intended to apply to companies providing automated digital services, such as search engines, social media platforms, streaming services, online marketplaces, online gaming, cloud computer and online advertising, as well as to consumer facing businesses generating revenue from sales of goods and services, including third-party resellers, intermediate suppliers and businesses generating revenue from licensing rights.

Commission Issues Letters of Formal Notice on DAC6 & ATAD Implementation:

The Commission has issued letters of formal notice to various Member States in relation to implementation of the DAC6 mandatory disclosure rules, as well as the ATAD Directives.

Belgium, Cyprus, Czech Republic, Estonia, France, Greece, Italy, Latvia, Luxembourg, Poland, Portugal, Romania, Spain, Sweden and the United Kingdom were issued letters of formal notice concerning implementation of DAC6. Germany, Greece, Latvia, Portugal, Romania, and Spain were issued with letters of formal notice concerning the implementation of ATAD1, whilst Cyprus, Germany, Greece, Latvia, Poland, Romania, and Spain were issued with letters concerning the implementation of ATAD2 with respect to hybrid mismatches with third countries. In addition, Belgium was issued with a letter of formal notice concerning implementation of the tax dispute resolution directive.

The countries must now respond to the letters. Should the Commission not be satisfied with the responses, it will then send a reasoned opinion requiring the Member State to comply with the EU law within two months.

North Macedonia Becomes Signatory to BEPS MLI Convention:

On 29 January, North Macedonia became the 94th jurisdiction to be a signatory to the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. The multilateral tax treaty allows jurisdictions to update their existing double tax treaties and transpose measures agreed in the BEPS project without further need for bilateral negotiations. It now extends to over 1,650 bilateral tax treaties.

Code of Conduct Programme – Croatia’s EU Presidency:

Croatia’s Presidency of the Council of the European Union set out the work programme for the Code of Conduct Group (Business Taxation) concerning the first semester of 2020. Notably, the EU ‘blacklist’ of non-cooperative jurisdictions for tax purposes that was revisited at the 18 February ECOFIN Council meeting.

Under the working programme, it is intended that the Code of Conduct group discuss a common EU position on exchange of beneficial ownership information, finalise discussions on the Foreign Source Income Exemption regimes falling within scope of the EU blacklisting process and revisit economic substance requirements by reviewing country treatment of partnerships. In order to compile a Code of Conduct Group Report before the end of Croatia’s EU Presidency, the following meetings have already been scheduled: 2 March, 1 April and 3 June 2020.

OECD Opens Consultation on Country by Country Reporting:

The OECD has published a consultation document inviting input concerning Action 13 of the Base Erosion and Profit Shifting Project, on Country-by-Country Reporting. The review is being carried out pursuant to the BEPS Action Plan, which mandated a review of CbCR under Action 13 in 2020.

The consultation document invites input on whether modifications should be implemented for Action 13 such that additional or different data should be reported, requesting practical experiences and issues with reporting requirements under Action 13, input on the use of the reported data by tax administrations, and on the effectiveness and appropriateness of thresholds and reporting.

EU: DG TAXUD Review of EU Exchange of Information Framework:

The European Commission, DG TAXUD has initiated an inception impact assessment looking into possibilities to strengthen the existing EU framework of exchange of information for tax purposes (“DAC”). The main issue that drives this Commission’ initiative for review of the DAC framework is the inability of tax administrations across the EU to obtain tax-related information on taxpayers who do business via the digital platform economy.

According to the European Commission: “Member States’ tax administrations have little information to correctly assess and control gross income (revenues) earned in their country via activities (such as renting a property via a web platform or giving a ride to a person who needs a lift and/or other cases) made via the intermediation of some digital platform which basically matches demand and supply. This is especially the case when the income or the taxable amount passes via platforms established elsewhere.”

EU Commission Publishes 2020 Tax Policy Report:

The Commission’s DGTAXUD has published the 2020 EU tax policy survey report, examining Member States’ tax systems. The Commission in the report highlights that over the coming years, work must be done at EU and international level to “reform the international corporate tax system”, as well as “intensify the fight against tax abuse”, calling for a coordinated approach to tackling tax avoidance.

The report contains a detailed analysis of Member States’ tax systems and their performances, as well as tax reforms in the EU and in Member States, and an evaluation of the Commission’s taxation policy agenda and actions taken between 2014 and 2019, and the impact of the agenda.

MALTA – VAT on Yachts – EU Commission sends letter of Formal Notice:

The European Commission has announced that it has sent an additional letter of formal notice to Malta in connection with the method applied for calculating the VAT on the lease of yachts. Following the initial letter of formal notice on 8 March 2018, Malta modified its legislation in order to align it with the requirements under EU law.

However, the Commission appears to be of the view that the revised national rules are still not completely in line with EU law, since a time-based methodology rather than a distance-based methodology should be applied to determine effective use and enjoyment. Without a satisfactory response within 2 months, the Commission may decide to address a reasoned opinion to Malta.


Source: Malta Institute of Taxation Click here and CFE Tax Advisors Europe Click Here

Please contact David Marinelli should you wish to discuss any matter relating to your Malta registered company.